Has the Stock Market Become Less Representative of the Economy?

Fisher College of Business Working Paper No. 2020-03-22

Charles A. Dice Center Working Paper No. 2020-22

55 Pages Posted: 7 Oct 2020 Last revised: 12 Oct 2020

See all articles by Frederik P. Schlingemann

Frederik P. Schlingemann

University of Pittsburgh - Finance Group; European Corporate Governance Institute (ECGI)

René M. Stulz

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

Date Written: October 6, 2020

Abstract

The firms listed on the stock market in aggregate as well as the top market capitalization firm contribute less to total non-farm employment and GDP now than in the 1970s. A major reason for this development is the decline of manufacturing and the growth of the service economy as firms providing services are less likely to be listed on exchanges. We develop quantitative measures of representativeness showing how firms’ market capitalizations differ from their contribution to employment and GDP. Representativeness is worst when the market is most highly valued and worsens over time for employment, but not for value added.

Keywords: Stock market, value added, listing, market capitalization, employment

JEL Classification: G23, G32, E44, K22, L16

Suggested Citation

Schlingemann, Frederik Paul and Stulz, Rene M., Has the Stock Market Become Less Representative of the Economy? (October 6, 2020). Fisher College of Business Working Paper No. 2020-03-22, Charles A. Dice Center Working Paper No. 2020-22, Available at SSRN: https://ssrn.com/abstract=3706131 or http://dx.doi.org/10.2139/ssrn.3706131

Frederik Paul Schlingemann

University of Pittsburgh - Finance Group ( email )

368A Mervis Hall
Pittsburgh, PA 15260
United States
(412) 648 1847 (Phone)
(412) 648 1693 (Fax)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Rene M. Stulz (Contact Author)

Ohio State University (OSU) - Department of Finance ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

HOME PAGE: http://www.cob.ohio-state.edu/fin/faculty/stulz

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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